Market Cap : 2.98 B | Enterprise Value : 2.75 B | P/E (TTM) : 9.69 | P/B : 2.59 |
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The zones of discrimination for M-Score is as such:
An M-Score of equal or less than -1.78 suggests that the company is unlikely to be a manipulator.
An M-Score of greater than -1.78 signals that the company is likely to be a manipulator.
Good Sign:
Beneish M-Score -2.48 no higher than -1.78, which implies that the company is unlikely to be a manipulator.
During the past 13 years, the highest Beneish M-Score of Federated Hermes was -0.82. The lowest was -12.01. And the median was -3.02.
* All numbers are in millions except for per share data and ratio. All numbers are in their local exchange's currency.
* The bar in red indicates where Federated Hermes's Beneish M-Score falls into.
The M-score was created by Professor Messod Beneish. Instead of measuring the bankruptcy risk (Altman Z-Score) or business trend (Piotroski F-Score), M-score can be used to detect the risk of earnings manipulation. This is the original research paper on M-score.
The M-Score Variables:
The M-score of Federated Hermes for today is based on a combination of the following eight different indices:
M | = | -4.84 | + | 0.92 * DSRI | + | 0.528 * GMI | + | 0.404 * AQI | + | 0.892 * SGI | + | 0.115 * DEPI |
= | -4.84 | + | 0.92 * 1.0643 | + | 0.528 * 0.9903 | + | 0.404 * 0.9515 | + | 0.892 * 1.1303 | + | 0.115 * 0.9136 | |
- | 0.172 * SGAI | + | 4.679 * TATA | - | 0.327 * LVGI | |||||||
- | 0.172 * 0.9613 | + | 4.679 * -0.039 | - | 0.327 * 0.8908 | |||||||
= | -2.48 |
* All numbers are in millions except for per share data and ratio. All numbers are in their local exchange's currency.
This Year (Sep20) TTM: | Last Year (Sep19) TTM: |
Accounts Receivable was $72 Mil. Revenue was 364.455 + 360.712 + 359.183 + 358.025 = $1,442 Mil. Gross Profit was 238.269 + 237.129 + 243.848 + 246.59 = $966 Mil. Total Current Assets was $569 Mil. Total Assets was $2,004 Mil. Property, Plant and Equipment(Net PPE) was $153 Mil. Depreciation, Depletion and Amortization(DDA) was $28 Mil. Selling, General, & Admin. Expense(SGA) was $534 Mil. Total Current Liabilities was $234 Mil. Long-Term Debt & Capital Lease Obligation was $197 Mil. Net Income was 85.822 + 81.196 + 64.178 + 82.107 = $313 Mil. Non Operating Income was 6.725 + 14.817 + -6.106 + 9.946 = $25 Mil. Cash Flow from Operations was 90.061 + 124.146 + 29.251 + 122.599 = $366 Mil. |
Accounts Receivable was $60 Mil. Revenue was 340.34 + 321.479 + 307.05 + 307.216 = $1,276 Mil. Gross Profit was 228.093 + 214.231 + 195.834 + 208.064 = $846 Mil. Total Current Assets was $421 Mil. Total Assets was $1,754 Mil. Property, Plant and Equipment(Net PPE) was $154 Mil. Depreciation, Depletion and Amortization(DDA) was $25 Mil. Selling, General, & Admin. Expense(SGA) was $492 Mil. Total Current Liabilities was $194 Mil. Long-Term Debt & Capital Lease Obligation was $229 Mil. |
1. DSRI = Days Sales in Receivables Index
Measured as the ratio of Revenue in Accounts Receivable in year t to year t-1.
A large increase in DSR could be indicative of revenue inflation.
DSRI | = | (Receivables_t / Revenue_t) | / | (Receivables_t-1 / Revenue_t-1) |
= | (71.976 / 1442.375) | / | (59.832 / 1276.085) | |
= | 0.04990103 | / | 0.04688716 | |
= | 1.0643 |
2. GMI = Gross Margin Index
Measured as the ratio of gross margin in year t-1 to gross margin in year t.
Gross margin has deteriorated when this index is above 1. A firm with poorer prospects is more likely to manipulate earnings.
GMI | = | GrossMargin_t-1 | / | GrossMargin_t |
= | (GrossProfit_t-1 / Revenue_t-1) | / | (GrossProfit_t / Revenue_t) | |
= | (846.222 / 1276.085) | / | (965.836 / 1442.375) | |
= | 0.66313921 | / | 0.66961504 | |
= | 0.9903 |
3. AQI = Asset Quality Index
AQI is the ratio of asset quality in year t to year t-1.
Asset quality is measured as the ratio of non-current assets other than Property, Plant and Equipment to Total Assets.
AQI | = | (1 - (CurrentAssets_t + PPE_t) / TotalAssets_t) | / | (1 - (CurrentAssets_t-1 + PPE_t-1) / TotalAssets_t-1) |
= | (1 - (569.414 + 152.771) / 2003.726) | / | (1 - (420.872 + 154.071) / 1753.971) | |
= | 0.63957896 | / | 0.67220496 | |
= | 0.9515 |
4. SGI = Sales Growth Index
Ratio of Revenue in year t to sales in year t-1.
Sales growth is not itself a measure of manipulation. However, growth companies are likely to find themselves under pressure to manipulate in order to keep up appearances.
SGI | = | Sales_t | / | Sales_t-1 |
= | Revenue_t | / | Revenue_t-1 | |
= | 1442.375 | / | 1276.085 | |
= | 1.1303 |
5. DEPI = Depreciation Index
Measured as the ratio of the rate of Depreciation, Depletion and Amortization in year t-1 to the corresponding rate in year t.
DEPI greater than 1 indicates that assets are being depreciated at a slower rate. This suggests that the firm might be revising useful asset life assumptions upwards, or adopting a new method that is income friendly.
DEPI | = | (Depreciation_t-1 / (Depreciaton_t-1 + PPE_t-1)) | / | (Depreciation_t / (Depreciaton_t + PPE_t)) |
= | (25.485 / (25.485 + 154.071)) | / | (28.098 / (28.098 + 152.771)) | |
= | 0.14193344 | / | 0.15535 | |
= | 0.9136 |
Note: If the Depreciation, Depletion and Amortization data is not available, we assume that the depreciation rate is constant and set the Depreciation Index to 1.
6. SGAI = Sales, General and Administrative expenses Index
The ratio of Selling, General, & Admin. Expense(SGA) to Sales in year t relative to year t-1.
SGA expenses index > 1 means that the company is becoming less efficient in generate sales.
SGAI | = | (SGA_t / Sales_t) | / | (SGA_t-1 /Sales_t-1) |
= | (534.369 / 1442.375) | / | (491.809 / 1276.085) | |
= | 0.37047855 | / | 0.38540458 | |
= | 0.9613 |
7. LVGI = Leverage Index
The ratio of total debt to Total Assets in year t relative to yeat t-1.
An LVGI > 1 indicates an increase in leverage
LVGI | = | ((LTD_t + CurrentLiabilities_t) / TotalAssets_t) | / | ((LTD_t-1 + CurrentLiabilities_t-1) / TotalAssets_t-1) |
= | ((196.689 + 234.379) / 2003.726) | / | ((229.2 + 194.375) / 1753.971) | |
= | 0.21513321 | / | 0.24149487 | |
= | 0.8908 |
8. TATA = Total Accruals to Total Assets
Total accruals calculated as the change in working capital accounts other than cash less depreciation.
TATA | = | (IncomefromContinuingOperations_t | - | CashFlowsfromOperations_t) | / | TotalAssets_t |
= | (NetIncome_t - NonOperatingIncome_t | - | CashFlowsfromOperations_t) | / | TotalAssets_t | |
= | (313.303 - 25.382 | - | 366.057) | / | 2003.726 | |
= | -0.039 |
An M-Score of equal or less than -1.78 suggests that the company is unlikely to be a manipulator. An M-Score of greater than -1.78 signals that the company is likely to be a manipulator.
Federated Hermes has a M-score of -2.48 suggests that the company is unlikely to be a manipulator.
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